Entering the Housing Market is Not for the Weak
Due to credit issues from our younger careless days, we've been late to enter the Toronto housing market. My husband and I have worked endlessly to improve credit scores, pay off debt, all while saving a down payment for a new home. It's been nerve racking and painful to say the least.
Not only have we had countless hours of attempting to manage looming debts, we've sat back helpless watching home prices escalate exponentially. Painfully watching homes that were once in our realm of realistic financing were quickly becoming unattainable while our hands were tied.
We've managed to scrimp and save some to at least get ourselves into the housing market now. Elated after meeting with our mortgage consultant we've begun the daunting task of looking, open-housing and soon: bidding.
Bidding and negotiating are the parts I've been dreading. I dread getting my heart set on a home only to have it ripped from my grips by a potential bidding war.
Take last weekend for instance.
First weekend out. Found a GORGEOUS home within our range; we went through on an open house. The home itself more gorgeous than the pictures had shown, and as we stopped to chat with the agent we found out it had already received a conditional offer based on financing; not to mention the two other offers which it received before that. The home had only been on the market for 2 hours Wednesday afternoon before it had eight walk-through visits.The owners strategically priced the house so it would fall into the lower price range which would result in a bidding war to get them more than asking price (so said the selling agent).
This is the type of market we're getting into as first-time home buyers.
Daunting to say the least.
It's hard enough to consider making what would likely be the largest purchase of our lives, but in this housing market - where you have to jump immediately to ensure The House is not scooped from under you - it's down right terrifying.
We've found that educating ourselves prior to heading out has made us far more comfortable even just looking for our potential new home. Some of the things we've found pretty handy include (but aren't limited to):
Know Your Budget
If you don't already, it's important to tally up monthly expenses and see what you have left over. Would there be enough left over at the end of the month to either put in a house fund (for repairs or renos) or even as a buffer for incidentals? A simple expenses vs. income tally sheet can give you a good idea of where you sit financially as well as give you an idea of what amount you can afford for a monthly / bi-weekly / weekly mortgage payment.
Must Haves vs. Wants
We all know we NEED to have that pool, a freshly renovated kitchen and a stunning family room with a fireplace, but which of those items could you or would you sacrifice if you found a home you LOVED that didn't include one of them? It's worth your time to make the list that you can provide your agent to avoid spending too much time on homes that are a no-go for what you must have.
Amortization Periods and Mortgage Payments
That 35 year amortization with monthly payments may look appealing on paper when you see the price of your monthly cost, but in the long run the amount of money 'wasted' in interest is astounding. Even changing your payment period to bi-weekly or weekly can significantly decrease the amount of time needed to pay off your house.
Plus, with a 35 year amortization the lender would consider your mortgage to be high risk which then tacks on a few more insurance costs as well as high-risk interest rates.
Do yourself a favour and find out what you can absolutely afford at the lowest amortization possible. That way you can save yourself YEARS of interest payments and have that home owed outright much faster.
Tax Benefits
In Canada the government has changed some of the rules for income tax benefits which have been a great benefit to homeowners. First time home buyers may not be aware of some options available to them.
Some tax credits that can help first-time buyers include the Land Transfer Tax Refund. It once was waived only when buying a newly constructed home, but it's since been changed to include resale properties (December, 2007).
The Home Energy Audit (pdf) is a program created to help homeowners run a more energy efficient dwelling which in turn saves money and resources. When buying a new home (even important for your existing home) it's best to have an audit by a certified auditor. They come to the house and make recommendations to make your home more efficient. When the recommendations have been met, any deficiencies improved, the auditor comes back and inspects the home again. The more upgrades completed in the 18 month period, the higher your rebate (the rebate amount tops out at $10,000).
The Home Renovation Tax Credit isn't quite as appealing but applies to your primary dwelling between January, 27, 2009 and February 1, 2010. For a maximum rebate of $1,350, you can complete a renovation (maximum expense of $10,000) to receive a tax credit from the government.
Find An Agent
Find an agent you can trust. Preferably a recommendation from someone you know and trust. We were lucky that my dad has a friend whom is an agent and the first meeting with him he was straight to the point and completely honest about some of the prospective properties we were (are) interested in. I immediately felt at ease, which made me sure he was (is) the right person for the job. Another important note: don't use the seller's agent as your own agent, find a separate agent with no ties to the property. This can save you tons of headaches down the road.
Don't be scared into buying something that you think is best for you without checking out your options. Get educated and know what you're looking for. It helps keep those selling agents at bay as well - which I've figured out rather quickly.
Happy Hunting!
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While she's not hunting for a new abode for her coveted Electrolux appliances, Samantha is writing at her personal site, Temporarily Me as well as at Craftastrophe.
